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The Equality Multiplier


  • Erling Barth
  • Karl O. Moene


Equality can multiply due to the complementarity between wage determination and welfare spending. A more equal wage distribution fuels welfare generosity via political competition. A more generous welfare state fuels wage equality further via its support to weak groups in the labor market. Together the two effects generate a cumulative process that adds up to an important social multiplier. We focus on a political economic equilibrium which incorporates this mutual dependence between wage setting and welfare spending. It explains how almost equally rich countries differ in economic and social equality among their citizens and why countries cluster around different worlds of welfare capitalism---the Scandinavian model, the Anglo-Saxon model and the Continental model. Using data on 18 OECD countries over the period 1976-2002 we test the main predictions of the model and identify a sizeable magnitude of the equality multiplier. We obtain additional support for the cumulative complementarity between social spending and wage equality by applying another data set for the US over the period 1945-2001.

Suggested Citation

  • Erling Barth & Karl O. Moene, 2009. "The Equality Multiplier," NBER Working Papers 15076, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15076
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    Cited by:

    1. Ive Marx & Lina Salanauskaite & Gerlinde Verbist, 2013. "GINI DP 82: The paradox of redistribution revisited: and that it may rest in peace?," GINI Discussion Papers 82, AIAS, Amsterdam Institute for Advanced Labour Studies.
    2. Ive Marx & Brian Nolan & Javier Olivera, 2014. "The Welfare State and Anti-Poverty Policy in Rich Countries," Working Papers 1403, Herman Deleeck Centre for Social Policy, University of Antwerp.
    3. Annette Alstadsæter & Hans Henrik Sievertsen, 2009. "The Consumption Value of Higher Education," CESifo Working Paper Series 2871, CESifo Group Munich.
    4. Baland, Jean-Marie & Moene, Karl Ove & Robinson, James A., 2010. "Governance and Development," Handbook of Development Economics, Elsevier.
    5. Mauricio Bugarin & Yasushi Hazama, 2014. "Consumer economic confidence and preference for redistribution: Main equilibrium results," Economics Bulletin, AccessEcon, vol. 34(3), pages 2002-2009.
    6. Erik Bengtsson, 2014. "Labour's share in twentieth-century Sweden: a reinterpretation," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 62(3), pages 290-314, November.
    7. Marx, Ive & Salanauskaite, Lina & Verbist, Gerlinde, 2013. "The Paradox of Redistribution Revisited: And That It May Rest in Peace?," IZA Discussion Papers 7414, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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